The rise of in-app sales
The global market for paid mobile apps is forecast to grow from 38 billion EUR in 2017 to more than 48 billion EUR in 2021. This forecast includes all payment models (downloads, in-app purchases, subscriptions) but does not include content markets (music, e-book and video apps). In-app purchases are currently the main source of income for mobile app stores (40.3% of total mobile app revenue worldwide). This is due chiefly to the shift towards a freemium model: close to 90% of apps today are free and, among the remaining 10%, half cost (much) less than a euro or a dollar. Users are used to being able to download apps for free, and to pay for the premium version. This trend has been spurred especially by the prevalence of mobile gaming apps whose in-app revenue increased by 14% in 2017.
Market dominated by Internet heavyweights
The top Internet companies continue to dominate the mobile app market in terms of active monthly users. Capitalising on the fact that it comes pre-installed on every Android phone, Google Maps, for instance, has been among the most widely used apps for several years. And most of the most popular apps are still those belonging to the Internet giants, following a series of massive acquisitions (Google owns YouTube, and Facebook owns Instagram and WhatsApp). If we exclude pre-installed apps, the most popular on both Android smartphones and iPhones, are social and communication apps, with Facebook, WhatsApp and WeChat heading the league. Drawing on their gigantic user bases, these apps now go beyond the use they were initially designed for, in addition to being used more and more by businesses for which they provide closely targeted solutions and customer services.
For-pay model losing ground
These popular applications do not necessarily translate directly into revenue, at least not outside the Asia/Pacific region. Google and Facebook earn most of their revenue (around 90%) from advertising. Their priority is to provide free services to be able to collect personal data on their users and thereby improve the efficiency of their targeted advertising. As a result, the ad-funded app model is fast replacing the paid app model in terms of revenue generation. We expect this trend to continue up to 2021, at which point the proportion of revenue generated by paid apps will have dropped below 20%, compared to 80% in 2012.